Electricity policy in the Baltic States: On the Eve of Decisive Decisions

By Vaiva SapetkaitÄ—

Several major energy projects are currently implemented in the Baltic Region. However, due to their complex nature and long implementation period the internal changes or changes in the international environment might determine long delays or even termination of project implementation. For instance, the referendum on the Visaginas Nuclear Power Plant (VNPP) left the countries in uncertainty and made them consider alternative ways to ensure energy independence.


This and other energy challenges have been discussed in Vilnius during the international energy security conference “Outlook & Perspectives in the Baltic Sea Region“ organised by the Lithuanian Energy Institute, DG Joint Research Centre (EC) and Energy Security Centre.


„We can refer to energy security  as technical security of the electricity (energy) supply and as a political security. We cannot influence political factors, but free and highly competitive market can reduce impact of political factors on energy“, said K.Kukk, representative of Elering, an independent electricity system operator in Estonia. Establishment of the common Nordic-Baltic electricity (energy) market could ensure higher energy security in the Baltic States and reduce the possibility to use energy as an instrument of political influence.


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According to K.Kukk, first of all it is necessary to ensure relevant amount of connections and generation adequacy. Countries of the region must agree on a common approach toward energy cooperation with the third countries (especially with Russia). They must also have a common position in the negotiations with the EU. Other relevant issues are: precise accounting of common energy resources, common energy reserves and unbundled TSOs (Transmission System Operator).


All the above issues are relevant at the European level as well: the EU initiated Third Energy Package aimed to separate production and supply from transmission networks. Another EU‘s initiative is Baltic Energy Market Interconnection Plan (BEMIP) aimed at connecting the Baltic Region countries to wider European energy network. There is also Ten-Year Network Development Plan (TYNDP) elaborated by the ENTSO-E. It includes a detailed  list of European electrical power network development projects (over 450 all in all) clearly outlining the future development of the common European grid.


„Today Estonia develops new cross-border projects, e.g.  EstLink 1, EstLink 2 and third line of Est-Lat“, said K. Kukk. EstLink 1 is the interconnection between Estonia and Finland with the transmission capacity of 350 MW, whereas EstLink 2 is a transmission of 650 MW due to be operational in 2014. The Est-Lat connection due to be ready by 2020 will connect Estonian energy grids with Latvia.


According to R.Staniulis, representative of Lithuanian electricity transmission system operator Litgrid, working in the advisory board of the Nordic power exchange Nord Pool Spot (NPS), a big step toward market development was made in June 2012 when Lithuania joined the NPS. NPS operates in Norway, Sweden, Denmark, Finland, Estonia and Lithuania. Latvia will join the NPS exchange in the near future.


Having become shareholder of NPS Lithuania has acquired the right to take part in the energy market development processes. However, according to R.Staniulis, problems arise because of too low energy transmission capacity in the Latvian-Estonian cross-border. Besides, Latvia is taking its first steps in establishing electricity exchange. In view of this electricity price in Lithuania is much higher than in Estonia and only a small part of Estonian energy reaches Lithuania.


„Although this aspect might be important, it will not be the main price determining factor. [...] Baltic electricity market should consider the tariffs applied in the Nordic markets, yet we must not forget that we will intersect with three different systems/price levels (Nordic, Polish and Russian) and it is difficult to say which will have major impact“, said R.Staniulis.


O.Linkevics, representative of the Latvian state owned share holding company Latvenergo, while responding to the results of the referendum in Lithuania on the construction of VNPP, highlighted that Latvenergo is determined to pursue project activity, unless a newly elected Lithuanian  Government decides to suspend VNPP project.


„To our mind, such a decision would increase a potential risk both to the Project itself and to further development of Lithuanian energy system“, said representative of Latvenergo. It is very important to keep pace with the VNPP work schedule and, irrespective of the decisions, delays might have irreversible lesions to project implementation.


According to O. Linkevics, though Latvia doesn‘t like the scenario without VNPP, the country considers a possibility to participate in another nuclear power development project in the region. There are also plans to resume the construction of a coal-fuelled plant (this project was suspended after Visaginas has been chosen as an alternative). Besides, there is also a possibility to reconstruct Daugava‘s hydro-electric power stations or construct new plants, including a biomass and municipal solid waste incineration plant in Daugava. Construction of coastal or off-shore wind farms is also possible.


According to O.Linkevics, irrespective of the energy scenario, Latvia has set the following goals: to complete liberalisation of electricity market by 2016, to increase Latvian-Estonian cross-border transmission capacity, and, most importantly, by 2030 to reduce energy import from the third countries by 50 percent.